Picture of a jar filled with money with the word pension written across it.

How to get your employees engaged with their pension

The way pensions are generally explained to employees doesn’t help anybody. Someone from a pension company going through the motions about the percentages the company will pay and what the employees will pay and when you can take your pension, accompanied by the lulling screen flicker of a PowerPoint slide change … so far, so ZZZZ.

Explaining pensions to employees is a bit like teaching history at school. Get the students to learn the Royal Family’s line of succession over several centuries and concentration might be tested. Tell them Henry VIII’s six marriages involved numerous accusations of cheating and resulted in two people being beheaded and they’ll be on the edge of their seats. 

There’s no such scandal in pensions fortunately, but there is one guaranteed crowd-pleaser: start with the free money. 

Three ways to free money

How many people do you know that will turn down free money? It’s a great way to start the conversation about pensions. 

Many people only think about the salary that’s offered with their role; they don’t think about the extra money their employer is giving them on top. For someone on the average UK salary of £33,000, an employer’s 3% contribution is £990. That’s nearly a grand for free! 

And that’s if their employer is sticking to the minimum. In a competitive job market, many employers are choosing to up their contribution to attract talent. Even better, an increasing number of companies are offering to match pension contributions (usually up to a ceiling). If your company is doing either of these, the argument of free money is going to pack an even bigger punch. 

The second route to free money employees can get excited about is Tax Relief. No savings account in the world offers an interest rate of 25%. But HMRC does. Tell your employees that if they save £1000 into their pension, the government magically tops it up by 25% and see what they make of that. The term ‘Tax Relief’ is undeniably yawn-inducing. But ‘free money’? That’s way more exciting. 

Free money from your employer and the taxman is a given when it comes to pensions. The third route to free money is not but may still be worth a mention. ‘Compound growth’ is another horribly jargony phrase that only the mathematicians will prick up their ears at. As pension money is largely invested in stocks and shares, it simply means that it has the potential to grow at a decent rate. 

If you put £1000 in a pension one year and the government tops it up with £250, it becomes £1250. It’s then invested by whoever manages your pension. If the stock market grows by 7%, it becomes £1338. If it grows by the same amount next year, it becomes £1431. In just two years, your £1000 has grown by more than £400. 

However, we are duty bound to point out that your capital is at risk when you invest in a pension. The value of your investments can fall or rise and you may not get back what you put in. Over the last 30 years the value of the stock market has risen by 7% per year on average but again, past performance is no indication of what will happen in the future. 

The right tools for the job

Aside from the financial advantages of a pension, we’d also recommend giving them a pension that’s fit for modern life. Which these days means one they can access from their phone. 

Think about your bank app. How often did you check your balance when you had to go to an ATM to find out? Think about how easy it is to check how much you’ve got left before payday now. You’re engaging with your bank account and knowledge is power – you’re probably better off because you do. It’s the same with pensions.

If a pension sits on their phone, your staff are much more likely to engage with it. And they really need to – 72% of people are not on track for a comfortable retirement, according to the Retirement Living Standards created by the Pensions and Lifetime Savings Association

Some pension apps will do even more. The Penfold app gives users a forecast of their future income by taking into consideration other pensions (including the state pension) and inflation. It will also make that mean something by letting users know how much they’re likely to have for common costs such as the weekly shop or an annual holiday. 

In summary, when trying to get your people interested in their pension, get their attention by highlighting the financial advantages and keep it by giving them a tool that will help them to save. 

Pensions have never been a sexy subject, but as with so many other things, they can become a really attractive proposition when presented in the right way. You’ll be helping to safeguard the financial future of your employees if you do. 

About the author – Pete Hykin

Pete is the co-founder of pension provider Penfold. With his fellow co-founder Chris Eastwood, Pete started Penfold because he’d experienced the difficulty of engaging with a pension both as a saver and as an employer who had to set up a pension scheme for employees. Pete and Chris have build a modern digital pension from scratch, aiming to do for the pension industry what challenger banks have done for banking.

To learn more about Penfold, visit this special HR Coffee Time link and receive a voucher for a free cup of Costa Coffee if you go ahead and book a virtual call with them to learn more about their pension solutions.